Daily wages and piece rates in agrarian economies
The paper presents an analysis of the coexistence of daily-wage and piece-rate contracts in agrarian economies. We show that, when individual effort is taken into account, daily-wage labourers typically form a convex set in the space of working ability. The most able and the least able labourers work on piece rates, as they can thus choose their own level of effort. We also prove that, on a monopsonistic labour market, the use of both contracts in equilibrium results from the profitability of market segmentation. Imperfect substitutability between workers under different contracts and the downwards rigidity of daily wages can also explain the coexistence of the two types of contracts in more general settings, e.g. perfect competition
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- repec:ilo:ilowps:241836 is not listed on IDEAS
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- Reddy, C. R., 1985. "Rural labour market in varhad: a case study of agricultural labourers in rain-fed agriculture in India," ILO Working Papers 992418363402676, International Labour Organization.
- Petersen, Trond, 1991. "Reward Systems and the Distribution of Wages," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 130-158, Special I.